Get House plan passed!

May 22, 2007

There comes a time in government when the bickering must end and a solution proposed. Such a time is needed in the case of the single business tax (SBT).

Here is the situation at hand:

The single business tax will expire on Dec. 31, 2007. At this time, the state does not have an official replacement for it. The state House and the state Senate have both created their own plans to replace the tax which have many issues that will need to be worked out in an atmosphere of distasteful party politics.

Because of this unknown tax situation many businesses are avoiding coming into the state of Michigan. In the meantime, the state's economy continues to worsen.

Under the plan passed by the state House, the current SBT of about $2 billion will basically be replaced through a 6.95 percent tax on business profits and a .48 percent tax on net worth. However, businesses with less than $10 million in gross receipts could opt for a 1.8 percent tax on adjusted income. Businesses with less than $350,000 in sales receipts would not be taxed, and there is a sliding rate to reduce the tax for business with receipts up to $700,000.

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To lessen the pain, the House plan gives $700 million in tax credits to businesses based on the number of employees that business has in the state and the value of its facilities - basically it rewards a business for being in the state of Michigan.

Plus, this plan would eliminate the 24-mill tax on personal property and create a 50 percent cut on industrial property taxes. Reimbursements would be given to schools and local governments for the money they would lose under this deal.

There are some major players supporting this plan, including the Michigan Manufacturers Association (especially auto companies) and the Michigan Chamber of Commerce - which has some concerns though - and the Detroit chamber. Some small businesses would lose out and contractors would be some of those that would lose out on this plan.

The Senate plan would bring in about $500 million less than the present SBT, meaning more cuts to an already trimmed - some would say overly trimmed - state government.

It has lower taxes on gross receipts and profits - .54 percent and 1.5 percent, respectively - and businesses with less than $15 million in sales could choose one of the two. Like the House plan, it does not have a tax on businesses with less than $350,000 in sales receipts, but has tax credits for businesses with sales over that.

For personal property the Senate plan would eliminate it on industrial property bought after 2007 and only give a 25 percent cut to existing equipment and machinery. Local governments and schools who would lose money do not get reimbursed.

It is clear that the House plan is the superior replacement to the SBT. While it could use some tweaks - maybe some breaks for more small businesses - it encourages businesses to come to the state. What is also impressive is the support from manufacturing and business organizations for it.

It's time for our politicians to start working for the people of this state and do what is right. The House plan is clearly the best of the two on the SBT issue.